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Fuel firms to be audited to establish fair prices

The Zimbabwe Energy Regulatory Authority (ZERA) is auditing fuels firms as it tries to establish the correct pricing for fuel in the economy, an official said yesterday.

Oil companies stand accused of profiteering as fuel prices in the country have largely remained unchanged in the economy while international oil prices have dropped by about 30 percent since June.

Petrol prices are ranging between $1.47 and $1.56 per litre while diesel is costing between $1.36 and $1.46 per litre.

But locals have questioned why local companies are non- responsive to global changes which is not the case in neighbouring countries.

Local fuel companies are only known for adjusting prices upwards but rarely, if ever, reduce them regardless of what happens on the global market.

ZERA chief executive engineer, Gloria Magombo told journalists on the sidelines of a meeting with the fuel sector that the regulator would conclude the audit before the end of the month which will be used in mapping the way forward.

“The prices differ depending on where they (fuel companies) are sourcing the fuel and it also depends on volumes,” Magombo said.

“But we are auditing them to see what exactly is the price at which they are buying the fuel. We have already audited four or five big companies.”

Experts in the sector estimate that oil companies are on average currently importing fuel, both petrol and diesel, at prices below $0.75 per litre.

But during the meeting, players in the sector said it was impossible for fuel prices in Zimbabwe to automatically adjust to drops in international prices due to the country’s peculiar circumstances.

“It will be folly of us to expect an alignment to international prices movements,” said ComOil managing director Lovemore Mazero.

“This is because of the challenges that we are facing as an economy, some of which are not related to international prices.”

Some of the challenges, he said, included high transportation costs.

Other players said oil companies had bought stocks in advance at higher prices and as a result could not slash prices based on changes on the international scene.

“Some want to try and recover from the past thin margins so they do not immediately reduce prices,” said one player.

Others played on the fact that Zimbabwe was a landlocked country, as a result it could not do what countries such as South Africa and Namibia, which are closer to ports were able to do.

But Magombo said that Zimbabwe was landlocked could not be used as an excuse as the same oil companies in the past used to adjust prices, up or down, in reaction to international price movements.

“If it used to happen in the past, why can’t it happen now,” she queried.

She said oil companies must also be fair to consumers who were also very much aware of what is happening on the international scene.- The Source

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The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.